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PM INTERVIEW WITH HAIDI LUN, BLOOMBERG

PM INTERVIEW WITH HAIDI LUN, BLOOMBERG

21 February 2017

Infrastructure investment; free trade; Ausgrid; Labor protectionism; voting preference deals; budget repair; iron ore prices. 

HAIDI LUN:
The Prime Minister joins us exclusively here on set at Bloomberg. Prime Minister it’s a pleasure to have you on.

PRIME MINISTER:
Great to be with you.

HAIDI LUN:
I want to start by talking about investing in Australia’s future economy. Because the Reserve Bank and the IMF have called on the Government to borrow more ‘good debt’ essentially, to invest in infrastructure. But there’s been a real reluctance. I understand you want to keep that AAA rating, but –

PRIME MINISTER: 
There actually isn’t a reluctance to invest in economic infrastructure, and we are doing so. We have a massive infrastructure program, $50 billion. That’s not including, of course, the National Broadband Network. We are focused now on investing more. You know when governments talk about investing, often they’re talking about making grants. But what we’re looking to do now is take a more innovative approach to investing, so that we take an economic interest in projects.

We’re looking to do that in partnership with state governments and with the private sector as part of our City Deals policy. So we’re taking a much more innovative and if you might say, commercial approach to investment in infrastructure. And we’re determined to do that.

We are focused on reducing Government debt but that’s really a function of living within our means. What we’ve got to do is reduce that deficit, that budget deficit., That’s being driven by an excess of government payments when compare to revenues.

HAIDI LUN:
A lot of that investment is happening in major cities or major states I should say, like New South Wales where it’s not as badly needed. Should the government be doing more given the low rate environment that we’re in, to be borrowing more and investing more in infrastructure? Because you know, even the IMF says: “Look debt-financed infrastructure investment will help support that AAA even if it means cutting the deficit at a slower pace.

PRIME MINISTER: 
Well we’re always looking for good projects. I was in Perth yesterday with the West Australian Premier where we’ve committed $1.2 billion to a very important road and tunnel project linking up with the port at Fremantle, the Freight Link Project. But that’s just one of many, as I say, right around Australia. We’re putting billions, tens of billions of dollars to work and we’re always looking for new projects. We want to invest more in economic infrastructure, you’re quite right, and the IMF is right to point to that. It is a big driver of growth, a very, very important driver of growth.

HAIDI LUN:
Is that obsession with the AAA preventing the Government from doing more, politically?

PRIME MINISTER: 
[Laughs]

Well we’re focused on bringing the Budget back into balance. As you know, that’s our goal. We have a plan to do that. We set that out in the Budget last year and we took that to the election and we’re seeking the support of the Senate to all of our measures. But it is very important that we support investment, that’s why we’re bringing down company tax. We have an Enterprise Tax Plan which is reducing company tax over a fairly gradual glide path. Nonetheless it sends a very important signal to investors, because as we know if you increase the return on investment by reducing business taxes, you get more investment. If you get more investment, you get more jobs.

HAIDI LUN:
I want to move on to the global trade environment. China is a crucial trading partner. Clearly President Xi Jinping has spoken at length about the willingness to step up, liberalise, become a greater responsible player on the global trade stage. What would you want to see, what does this look like, given that you have President Trump’s ‘America First’ stance, you do have rising protectionism in markets like Europe, the UK. What would you want to see from China? Would you want them to address the steel glut issue that has been contentious among many trading partners?

PRIME MINISTER:
Yes, it is and I’ve discussed that with Chinese leaders in the past. They’ve given their commitment to address it and reduce overproduction. But I want to say that it is vital that we maintain the drive towards more open markets and free trade. Trade means jobs. Australia is a trading nation, our future depends on not simply selling things to 24 million Australians, but selling them to the whole world. So as I said in Hangzhou at the G20 last year, protectionism is not a ladder to get you out of the low growth trap. It is a shovel to dig it much deeper. So that’s why we are committed, Australia is committed and indeed as China is committed too, as the President said at Davos, to free trade, to opening up more markets. It’s been a very important element in our successful transition from the peak of the historic once-in-a-lifetime terms of trade boom. The peak of a massive mining construction boom. That came off, as it was always going to. Many economists said that we were going to have a hard landing. Well, we didn’t. That’s in large part because of opening up those big markets in Asia.

HAIDI LUN:
As has been said, it’s no lot a one-way street through. I mean, are foreign investors facing a more protectionist environment when it comes to picking up Australian assets? We’ve seen that with Ausgrid.

PRIME MINISTER: 
There were specific circumstances there. There will always be circumstances where foreign investment is not regarded as being in the national interest. But generally you’d have to say there are very few countries in the world – I can’t think of any in fact – which is not more open for foreign investment than Australia. There are very few barriers to investment in Australia. There are some, and obviously, naturally, as the Government, we determine what’s in the national interest. But there is massive investment from all of the countries you’ve mentioned in Australia, and we welcome it. But we always ensure that it’s in our national interests.

HAIDI LUN:
In Australia though, we have the situation where these more protectionist – I guess you can say ‘right wing’ voices are getting a louder say in Parliament about what kind of investment goes on. In terms of One Nation, in terms of dealing with our own kind of protectionism that’s sort of following what we saw with the Brexit vote, Trump’s victory, do you think you’re engaging in the right way?

PRIME MINISTER: 
Yes. Because we make the case that more trade means more opportunities for Australian businesses. Australian businesses are the best in the world, Australians are smart, they’re creative. Our produce is the best in the world. So we are having the biggest, widest playing field to run onto. We don’t just want to sell to 24 million Australians, we want to sell to the whole world. That’s why we want to see more access to that.

I mean, the really concerning factor in terms of protection here, is the way the Labor Party led by Mr Shorten – which has historically been supportive of free trade – has become increasingly protectionist. This is a populist move on the Labor Party’s part. Mr Shorten thinks that’s politically advantageous obviously.

HAIDI LUN:
To be fair Prime Minister, your party is the one that’s doing preference deals with One Nation, I mean does that kind of level engagement, is that dangerous? Is that just encouraging the rise of a populist sentiment?

PRIME MINISTER:
Well it’s important to understand, perhaps particularly for your non-Australian viewers, that in most parts of Australia we have a compulsory, preferential voting system. So you have to number a square next to the name of each candidate on the ballot paper. There will always be the allocation of preferences, but just because preferences are directed to a party, doesn’t mean that you support them. It is quite the contrary. We will always say ‘Vote 1 Liberal’ or ‘Vote 1 National’ and then how we allocate the preferences on the how-to-vote card is really a political calculation, but it is always designed to maximize our vote, just as other peoples’ how-to-vote cards are too.

HAIDI LUN:
I want to move on to President Trump. It has become something of a parlour game, the guessing game over whether the President means what he says. In your interactions, in your experiences which has been well documented in the media –

PRIME MINISTER:
Well they have been well documented. Whether they’re accurately documented is another matter.

[Laughter]

HAIDI LUN:
What kind of a leader is he? Because there are some parallels, clearly very different temperament, but there are some parallels to be drawn. You both come into politics from business, your Goldman alum, he seems to have penchant for hiring them. Do you have similarities? Do you have things in common?

PRIME MINISTER:
Well I will leave that to others to judge. But we have had several conversations now, they have been constructive, frank and forthright. We have a very deep engagement with the American administration and every American administration.

The Australia-US Alliance relationship is very deep. It is built on over a century of fighting side-by-side in every major conflict. It is an Alliance. It is an economic partnership. It’s built on millions of people-to-people links and family links. so it is very, very strong and very deep.

HAIDI LUN:
How do you view him as a man though?

PRIME MINISTER:
Well, he is a very big personality and he has got a very big job.

HAIDI LUN:
In terms of the difficulty, the added difficulty of decision making? Because this is a brand new world. He is someone who does diplomacy via social media, via twitter, there is certainly an element of the unexpected. Does that change the way that you deal with the US?

PRIME MINISTER:
No, we pursue our national interest methodically, calmly, consistently. We make our case very frankly and forthrightly when we are speaking to our American friends, but as you’d expect with good friends, we are fairly circumspect about what we say in public.

It is important we give very frank advice and have frank exchanges with our American counterparts. But we don’t lecture them through the media. It’s very important, I think, to be able to talk frankly, as good friends should.

HAIDI LUN:
In the markets we have been trying to work out what is Trump the President versus what is Trump the candidate and a lot of that has come to fruition in terms of pulling out of the TPP, in terms of his view on immigration. Do you think he means what he says?

PRIME MINISTER:
Well that’s a judgement that you’ve got to make. I think people will always assume that presidents and prime ministers mean what they say, naturally. But in terms of a commentary on US politics, I will leave that to all of the collective talent at Bloomberg. It’s not my job to comment on US political developments.

HAIDI LUN:
I want to move on to China. There are still three employees of Crown Resorts that are being in detention in China. It has now been four months. What are you doing about it?

PRIME MINISTER:
They have been provided with consular assistance and again, we always support Australian citizens when they are in trouble overseas. That’s quite a lot of people as you could imagine, there is well over a million Australians overseas at any given time. So there is always plenty of consular cases and we support them, advise them, assist them in terms of their dealings with the local authorities.

HAIDI LUN:
You and I would both know that there a pretty serious concerns about the lack of transparency, the stage of development that the judicial system China has, is in at the moment. Are you concerned about due process?

PRIME MINISTER:
We respect China’s judicial system, their legal system and we’ll always seek to support Australians, assist Australians. But when you are in China you have to obey the laws of China, just as when you are in Australia, you have to obey the Australian laws.

HAIDI LUN:
I want to talk about the Budget because we are likely to see this windfall from this incredible recovery we have seen in iron ore. How sustainable is it? You know, you’re facing some pretty tough issues getting savings measures into the Senate. Is it hard to admit that we can’t afford some of these tax cuts that we had in the Howard era?

PRIME MINISTER:
Well, we have made a number of changes, as you know, to benefits or concessions in terms of superannuation tax concessions. We have made changes there which have contributed to budget repair, that super systems, super tax concessions are now fairer and the system is more flexible and it is certainly better for people on lower, low and middle incomes. So it is a fairer and more flexible superannuation system. But we will continue to make our case with the Senate.

As far as iron ore prices is concerned, I didn’t make a habit of predicting commodity prices when I was actually in business, let alone as Prime Minister. So again Bloomberg is probably better able to do that. But obviously the rise is welcome. We are a big exporter, so we welcome a rise in price.

HAIDI LUN:
In a world where we are seeing the borders of trade seemingly close, where does that leave Australia? I mean, what does free trade look like if we continue to get the populist uprisings? In Europe we have got a number of European elections and it does, you know if you were to be, I think bearish, it does look like we could end up with a similar result to Trump, to the Brexit vote.

PRIME MINISTER:
We have a free trade agreement with the United States which is working very well. We have entered into new free trade agreements with China, Korea, Japan and enhanced our free trade agreement with Singapore. We are working on free trade agreements with Indonesia and with India and we are open for business. We are looking to see how we can continue with the intent of the TPP even though the United States has pulled out of it. So we are focused on opening up more markets all the time.

You know, it is easy to get pessimistic because of a few political developments. I think the trajectory in favour of free trade will continue. But certainly from our point of view, regardless of what happens in other places, from our point of view it is manifestly in Australia’s interest to have access to more markets. Of course, it benefits Australians being able to have cheaper goods that they can buy at the shops. So, we benefit from free trade, both on the export side and on the import side. It is a win-win. That has been very clear for a long time. Trade means jobs.

We are a much more trade-dependent economy for example than the United States. So it is critically important for us as a big trading nation, a big exporting nation, to have access to more markets and that is what we have sought to do.

HAIDI LUN:
Prime Minister, I am aware that we need to let you head off but it’s a pleasure – thank you for coming on for us.

PRIME MINISTER:
Thanks very much.

[ENDS]

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